searched in some detail. could not find a precise answer..so here goes..for a long down and out put EURUSD Strike 1.36 (assuming atm) Put which KOs at 1.30I would think the long holder of this Down and out Put will be short delta through the barrier as a hedge (to protect against the change in the value over the barrier) and thus need not apply a barrier shift at all..if mkt goes down through 1.30 the long unwinds at a better level..I think my reasoning makes perfect sense but I hear some contrarian views stating there should be a shift ..comments appreciated.

this makes sense from a long DOP perspective. but the seller of the DOP will have to shift the barrier.

Why do you want to shift the barrier? Just to avoid delta slippage at the barrier?if yes, then the person who is short a barrier (who does not want the barrier totouch - the holder of the option in this case) will always have a take-profit ofhis initial delta-hedge at the barrier, and he does not need to shift the barrier.However, lets say that the option is done in very big size and the delta hedge is500 million. The holder has to buy back 500 million at 1.3000. The barrier will beconsidered triggered even if 1 million trades at 1.3000. So if the spot just touchesthe barrier and shoots up, the holder has a big problem as he won't be able tocover his entire delta. Choices - shift the barrier or leave take profit delta ordersjust ahead of the barrier, say at 1.3001 (same thing basically).